Q4 2019 Earnings Call

Thank you for your patience your Axcelis technologies fourth quarter and full year 2019 conference call will begin shortly again, thank you for standing by.

[music].

Good day, ladies and gentlemen, and welcome to the Axcelis technologies calls to discuss the company's results for the fourth quarter and full year 2019. My name is Daniel I will be your coordinator for today.

I'm all participants are in listen only.

<unk>.

We will be facilitating a question and answer session towards the under this conference.

If it anytime during the call you require assistance. Please press star followed by zero coordinator, we'll be happy to assist you.

As a reminder, this conference is being recorded for replay purposes.

Oh now like turn the presentation over your host for todays call Mary Puma.

<unk>.

CEO of Axcelis technologies. Please proceed ma'am.

Thank you Daniel with me today, it's Kevin Brewer Executive Vice President and CFO, Doug, Washington, Executive Vice President of corporate marketing strategy.

If you've not seen a copy of our press release issued last night. It is available on our.

Our website.

Playback service will also be available on our website as described in our press release.

Please note that comments made today about our expectations for future revenues profits and other results are forward looking statements under the Fccs Safe Harbor provision.

We're looking statements are based on management's current expectations and are subject to the risks inherent in our business.

Risks are described in detail in our form 10-K annual report and other FCC filings, which we urge you to review.

Our actual results may differ materially from our current.

And we did not assume any obligation to update forward looking statements.

2019 was a challenging year for the industry with memory spending remaining low throughout the year.

The year also showcased a very healthy axcelis.

Focused strategy on ion implant.

Combined with the hard work and dedication of our employees and to the encouragement in support of our customers and suppliers enabled us to achieve several critical milestones in our drive to market leadership.

In 2019, we continued to expand the purion installed base growing our large.

And diverse group of customers.

We also sharpens, our focus on key market segments in the mature process technology area, such as image sensors power devices and mature foundry and logic.

And finally, we grew our family of theory on product extensions with the watch for new Purion.

Implanters specifically targeted at the segment.

These new products are built on the common purion platform and designed with our new concurrent product development methodology.

This approach enables new products to come to market with higher quality and lower initial cost.

Additionally.

The new products, all target high value implant challenges for our customers and as a result deliver higher margins in our base Purion products.

These four new Purion products are designed to create a sustainable competitive differentiation to support our customers technology and manufacturing.

Actually need for critical implant step.

The Purion Dragon and the Purion XE Silicon carbide are at customer sites, well the first Purion H 200, and Purion XE Mac systems are currently running demos for multiple customers in our advanced Technology Center.

We made this investment in R&D, while maintaining a vigilant on operating expenses.

It's allowed us to remain profitable through this cycle well in 2019, delivering annual gross margins of 42%.

Gaining a healthy balance sheet and instituting a share repurchase.

Program.

Our Q4 financial performance resulted in a positive ending to this critical year.

I'd like to highlight a few Q4 in full year financial results and provide Q1 guidance.

Revenue for the fourth quarter was $107.7 million.

50.

5.1% increase over Q3.

Earnings per share of 29 cents was well above guidance and consensus.

Our strong Q4 financial performance was driven by a 94% increase in systems revenue.

Better than forecasted gross margins of 41.1%.

And improving C S and I revenue.

In 2019 revenue was $343 million with earnings per share of 50 cents.

During the fourth quarter memory accounted for 39% of our shipment split evenly between DRAM and NAND.

The majority of.

For shipment, 61% went to mature foundry logic customers.

For the year memory accounted for just 29 per cent of our shipments with 71% going to mature foundry logic customers.

The geographic mix of our systems shipments in the fourth quarter was China, 42% Korea, 31%, Taiwan, 11% and the rest of the world 16% is breakout is reflective of a strong mature foundry logic mix in all of these regions as well as improving memories.

<unk>.

Yeah.

Before turning to our guidance for the first quarter I'd like to briefly touched on the Corona virus.

Put policies in place to safeguard <unk>, our employees well continuing to serve our customers. There's a rapidly changing situation and we will continue to monitor it closely.

In the first quarter, we're forecasting revenue of approximately $150 million, we expect gross margins of around 37% gross margins will the impacted by the expected closure of three Perry on evaluation systems in the quarter, including the first Perry on Dragon.

They expect operating profit of approximately $9.5 million, an E.P.S. about 21 sense.

We expect a memory segment to account for approximately 50% of R. Q1 shipments with D. Ram representing about 60% and non volatile memory, which includes knee and and we did cross point accounting for the remaining 40%.

And 2020, we expect to mature process technology segment to remain strong, especially an image sensors and power devices.

The memory segment will remain active with the incremental capacity additions and technology advances throughout the year.

The currently expect memory to account for approximately 35% of revenues in 2020. However, we are currently seeing some increase quote activity for D. Ram that could materialize in the second half of the year.

We still expect a more significant recovery for the overall memory segment to occur in 2021.

Industry is beginning what will likely be an extended gross cycles, driven by the new communication capabilities of five G. technology.

The five g. infrastructure build has begun will accelerate and 2020.

The infrastructure expand new five g. capable phones and other devices will drive a strong memory cycle beginning in 2021.

Following that some beginning in 2022, it will be another cycle of industrial I.O.T. applications, even bigger than the last which will drive strong growth in the mature process technologies segment.

As a result of our market segmentation approach and focus period product family offerings excels is extremely well position for strong growth during the upcoming five g. driven cycle.

Now I'd like to turn it over to Kevin to discuss our financials. Thank you marry.

A few for financial results and a strong what revenue gross margin and earnings per share.

Oh, well above company guidance and consensus estimates.

Based on our full year 2019 results. The smart the first time X. also has remained profitable.

<unk> industry cycle.

Acknowledged shaved over five years or consecutive quarterly profits.

Making investments are the company and the stronger position as we answer what should be an extended periods.

[noise] through the introduction of new apparent product extensions.

And he was cost other activity.

Proves or gross margin your or mere making this a second consecutive year gross margin rather than 40%.

Nationally they maintain the strong balance sheet.

An extra two to share repurchase program.

[noise] to align with our market segment strategies yup, aided or 550 million dollar revenue model, which we believe as achieve all over the next two years based on a strong memories cycle.

We also added a new 650 million dollar model, which should issue Boland four to five years.

All small those reflects stronger gross margin performance.

Lower operating expenses are puts on a revenue.

Significant increases in operating profit and free cash flow.

[noise] I'll turn to the fourth quarter, a full year 2019 financial results.

She do for revenue finished at $107.7 million.

While above our guidance compared to 69.5 million tooth right.

Two four system sales or $71.4 million.

36.8 million into three.

Two four C.S. and I wrote when I've finished at $36.3 million.

Fair to 32.6 familiar next you three.

Them by improving fab utilization and upgrade sales.

Full year 2000, a 19 revenue was $343 million compared to 442.6 million in 2000 the game.

Sustenance, rather than it was $202.6 million compared to 280.4 million in 2018.

C.S. and I revenue was $140.4 million compared to 162.2 million in 2018.

Do you for sales <unk> top 10 customers conifer, 85.5% of our total sales.

Apparently 81.5% tooth right.

For customers were a 10% or above.

The two customers and cues right.

Two four system bookings were 70, some quite a million dollars.

Or the 80.2 million executes rate.

Like Chew for up to go ratio at 1.06 versus 2.22 and cues right.

Clogging, two four including deferred revenue finish and $99.3 million.

I heard a 93.4 million and q. through.

Two four combined S.G.N.A.N.R. and D. spending.

The $1.1 million 28.9 per cent of revenue compared to 28.7 million or 41.3 per se tooth right.

<unk> and a quarter was $17.5 million.

R. and D. 13.6 million.

And two one we expect S.G.N.R. and D. spending.

<unk> $33 million runs for all the above this level through the remainder of 2020.

Driven by an increase in evaluation tool spending and investment in our product.

Are also on investing in I.T. infrastructure, we'll see higher variable in the southern compensation costs and 2020.

This level and investment in our business and products is required to cheer about 550 650 million dollar revenue models.

Two four gross margin was 41.1% and above guidance.

Two four gross margin was driven by product mix.

Increasing C.S. and I revenue continued cost activity.

Well your gross margin was 42%.

Compared to 40.6% in 2810.

Regarding to one gross margin of approximately 37%.

Thing from a less variable Max and they expected closure of three carry on evaluation systems.

Polluting, our first period and Dragon.

Without the Eva closures.

Margins would be about three points higher for the quarter.

Expect gross margin will return to above 40, plus on a quarterly unfamiliar paces.

Remains a key is that we continue to have solid execution on our gross margin improvement initiatives.

Sandra reduction of the full care product line improve the system standard margin.

I went on or basis points on a ruling for a quarter average.

Are print profit to four finished at $13.2 million.

All of a few three operating profit of 1.9.

Oh, you're operating profit was $24.2 million.

60 million and 2018.

Regarding if you want operating profit of a proxy and $9.5 million.

Q for node income was $9.7 million or 29 cents per share above guidance compared to point 7 million or two sounds per share uncouth right.

Oh, you're an outcome was $17 million or 50 cents per share.

Compared to 45.9 million or dark 35 per share in 2018.

Regarding q. on earnings per share of approximately 21 sense.

<unk> Oh this reflects our current assessment potential and I kind of business from across the virus.

As you know this continues to be a rapidly changing sexual situation, which are very close to be a monitoring.

Your turn to queue for our results M. It sorry ended at $140.4 million, apparently 138.4 million Q3.

<unk> turns excluding evaluation tools finished it to compare at 1.2 to three.

Everybody else on a business.

Do you for a cause pay over $25.3 million.

The 21.3 million Q3.

Two four receivables were $83.8 million.

Compared to 49 million and Q3.

Our revenue and late in the quarter shipments drove the significant increase in receivables.

Two four cash finished at $146.5 million compared to 162.2 million executes right.

Cash in a quarter was lower due to the spike in a controversy doable.

3.7 million dollar spent on share repurchases.

The 2020, we've put in place at 10 35, one plan to implement our current $50 million shirt purchase program.

And to four we continued to make solid progress on cross margin improvement Road maps.

A new pure and product on extensions mine would work on our cost of initiatives are expected fuel higher gross margin as we drive towards our 550 650 million dollar business models.

These models can be found in our best her presentation on the company website.

Thank you.

Well now turn a call back they're married for closing comment. Thank you Kevin.

We are pleased with our strong fourth quarter performance and excited by the expectation of an extended upturn driven by innovations enabled by five G. technologies.

She was continued partnership with customers in collaboration with our peers Axcelis will offer a steady stream f. peery on innovation that will support the five g. enabled world.

We believe this will drive us real leadership position in I on implant and a sitting shareholders customers and employees alike.

Reiterate the statement I made to open our in past today in September.

Excel S. is uniquely positioned with the capability D.N.A.N.N. wavering focus to solve customers high value high impact I on implant challenges.

What's that I'd like to open it up for questions Daniel.

Ladies and gentlemen, if you wish to Russia. Please <unk> followed by one on your touch tone telephone.

Your question has been answered or you wish was for all your question press the pound key please press star one to begin.

Your first question comes from Patrick Code Stiefel. Your line is now or.

Oh, Thank you very much and rests on a nice quarter and and the year already made me first off in terms of the mature technology can go opportunities still ahead in 2020 do you see that is being more broad based this year or is it going to be concentrated would've few customers or give me some of the fab.

Objects are out there.

Yeah, what we're seeing right now Patrick is that it's going to the broad based in terms of a number of customers as well as geography as we said we expect for the segment to continue to remain strong through 2020, particularly with a focus on power devices and image.

Answers.

Right that's helpful and maybe as my follow up question in terms of the new products you discuss that you're able to stay last year and the expansion as you mentioned some are obviously a customer side evaluation is some are still within your headquarters right now is 2021, where where.

Going to see those extension products, Oh, I guess, it high volume or could be for some time in the second half of this year.

Well, we go for some of those products, we are going to see repeat orders come through this year, but I think you're right. The majority of our expectation is that the you know the majority of additional orders will get for those products will calm next year 2021.

Yeah. This AD for that right now.

We have a step up any evaluation tools spending this year, that's driving some of those placements.

Right and that will be again to futures look in front of 2021, where we'll see some repeat orders from those.

Gray and maybe my final question for you, Kevin specifically with these new products and the impact to gross margins are you didn't mention obviously the evaluation news typically have lower gross margins Sawyer I understand that on the model, but you also said longer term ball has higher gross marches how quickly can you get.

I guess get gross margins higher once they start volume ramping to customers.

<unk> is it going to take some time as it usually does or is there a quicker step up to get to those higher gross margins.

Oh, there's there's definitely a quirk quicker step up with the product extensions than the typical new products release and I think.

You know, we're still very comfortable with our 550 model, where gross margins in that 42% to 43% range.

So as we wrap towards that will continue to see the margins improve.

We're getting off a little bit of a small starting to one but I think even with for the full year well, we're going to be above 40, and I expect to see the following orders P.I. Q1.

Above that 40, mark as well so we're.

Or a very optimistic about the product extensions driving margin improvement and we're continuing to work the cost out come something we you know we never let up on so volume definitely is going to help us.

[noise] great. Thanks, a lot guys.

Thanks.

Rick.

Thank you and our next question <unk>, you want us now awesome.

Hi, This is Peter Pan calling for Crego bells, and thanks for taking.

Questions first off is just on the D. Ram color is the expectation men followed by DRAM or do you kind of C.D. Ram pulling in vs net swimming I get color in that.

Yeah. So so for US you know in the implant side of of that market as Mary said, you know, we're seeing it it kind of split with mandates incremental ads in capacity you to some technology.

And then DRAM, it's it's incremental ads and and the shrinks. So so for minimum plan perspective, we're sort of seeing both we expect.

And you know to continue through the year as was mentioned in the script, we're starting to see an increase a level of activity quote activity for DRAM projects, which couldn't materialize. The end of the here, but we're we're really expecting 2021 to be the time when it all comes together for both.

Got it and off of one q. it seems like the memory and foundry logic is pretty.

Blade is that kind of the expectation you know.

Counter 20, or it's you know memory going to ease off in you know.

That kind of think about the profile and mix upcoming between.

Oh, So we are still currently expecting memory to be lower in in the 35% of our systems. This year as we said with the quote activity increased in India <unk>. Good change in subsequent quarters, but for now we see it lower we do see you know increased activity in the mature markets.

A lot of activity and image sensor is a lot of a lot of activity in the in the mature found Roger space just in general so that that will continue to drive that piece of the the business.

Got it in one final question on on the surface mine, a nice C.A. you know a quarter and Quarterize is that a line item more stable throughout.

The County, 20, or do you see kind of you know that have increased here over here.

Oh, we're starting to see you know the fab capacity starts to come up so utilizations, improving so that will obviously drive the as well as you know all the new tools that we plan to ship so.

You know we've been on a run rate higher than that I think if you go back probably a little over a year. We've we've had some quarters ever closer the 40 million. So I would expect this thing <unk> should continue to improve.

Great. Thank you guys Oh, congratulations on a strong results.

<unk>.

Thank you in our next question comes from Christian swap with quite calm your lines and often.

Great. Thanks, Fantastic quarter, guys as we Kevin did I hear you say that you you expect to be a protein or add to your 550 target model in 21 or today dot here that right.

Within the next two years.

Well within the next okay, perfect and then when we get to 21, <unk> <unk> <unk>, that's or from a rent from or run rate point of view would definitely be there and 2021 I just you know.

He was going to look like also predicate predicated on a memory ricotta yeah. It does it does a in you know later this year in 2021, which is more likely.

Right isn't that that was my next question. Thank you [laughter] is is how do you guys see that significant memory coat recovery taking place in 21 is that you know going to be very d. ram specific or or or a combination of flash N.D. Ram.

Oh right now we see it as a combination Christian freely.

We'll start to see the five do phones towards the end of this year, having more impact and that's driving a higher DRAM as well as some higher Nan and then of course, the the cloud in the General you know general stories platform is driving Fernand. So so we see 2021 is.

Being sort of the next big cycle from a memory perspective, where there's significant fab expansion in new capacity.

Okay, Great Fabulous no other questions. Thank you.

Things Christian.

Thank you and our next question comes from Tom <unk> with D.A. Davidson <unk> no.

Yeah. Good morning, maybe just to follow question memory, what is your relative exposure to the DRAM market versus the name market because we're seeing a lot of companies talk more about it and and recovery. This year, the D. Ram and yet you still have a little more exposure looks like on a d. Ram side.

Yeah. So so in.

In terms of new if it's new wafer starts a new capacity that's added where is pretty equal <unk>. You know, it's a different product mix for us and we'll see more high energy.

I mean, and DRAM, we'll see more more high current so slightly different product mix, but similar opportunity. When there's you know full cycle of you know big capacity ads.

When when we're in the situation we're in kind of in 2020, where there is where additions we don't participate in the layer additions, that's where the <unk> <unk> processes participate but oftentimes there are some additional implants that stick go into the next node and definitely into.

Any new capacity, that's added and so that's how we participate there and again, it's it's a little more high energy for us.

<unk> Oh, we participate both in the technologies shrank, which usually requires some new and more difficult implants, and as well as in the capacity side.

Okay. I think that's helpful. And then May I might Miss down your comments about the current a virus did you quantify that at all or how much that's impacting your Alec for the first quarter.

Yeah. So what we says we've we've we've put in to our guidance and what we feel impact is at this point in time, a network continuing to monitor it because it is you know as you notice the changing event on a daily but at this point our guidance assumes any knowing impact from the virus.

Okay and for you does it impact just systems business C.S.I. or is it more on the the manufacturing sites.

It wouldn't be a across the board impact.

In you know a lot of it has to do with.

In terms of shipments getting shipments end to certain areas and then try and get parts so but.

At this point, we haven't Oh say, we haven't seen a major impact.

And the can we have assessed where we are at this point and then included the into our.

Okay. Thanks, finally, Kevin when you look at the margin progression, you're expecting over the next year or so or all for the new tools, you know nice creative margin structures or is there a difference between the four products from Marshall point of view.

So the the products that we release back in September.

They're all very good margins and I would say a creative for the most part to where we are today, especially on an average there are definitely <unk>, we have right now.

Okay. Thank you for your time.

In general Tom when we look at the UN segmented market, we looked Matt designing product specifically for him and sensors and for power devices and for a certain challenging implants, Oh, there's higher value to be had for the customer and and that's reflected in in pricing in margin.

Okay. Thanks.

Thank you in our next question <unk>, David duly with steel How'd. Your line is now.

Thanks for taking my questions and congratulations on nice results just as far as the evaluation systems go could you just kind of walk us through the accounting you pack of those I guess I understand.

You know the marketing impact was their revenue impact and.

And you know how exactly are you county for these.

So there is a margin impact because it costs are typically higher on these tools.

As we have them in the field were making changes and that that goes against the gross margins.

Sometimes pricing is on the lower end on an email tools, so that margin impact.

Also on the operating.

Inside.

There's a lotta support from engineering and selling that go into these tools so that increases your affects as well.

So those are those are related to areas, David you kind of hits us on both sides and the only other place is they do stay on our balance sheet is inventory yeah he'll their converted right that as a good point, so R.M. and sorry.

<unk> said, our asset until we convert the P.O. is he under the valves cycle.

Okay and.

<unk> <unk> evaluation systems to come during the year.

So we have one evaluation system outstanding today. It is added memory customer, yes, I mean, as Kevin mentioned, our evaluation budget for the year is up so we fully expect to place multiple evaluation units you know across multiple segments across all of the segments.

During the year on year over your your belt budget is is measurably.

Well.

When.

I I realize it's difficult to judge, but when do you expect the evaluation systems to produce repeat orders.

Well so the evaluations that are in the field and expected to close you know I'm in this quarter, we would have opportunity at that 0.4 following orders as the customer ramps that particular process or or that capacity. So in the case of of the.

Dragon, that's that's N.D. Ram and and as that's as that gets some capacity ads for those processes than we would have opportunity that could be following orders I mean, 2020, Oh, we definitely would expect higher volumes as we go into 21 as the memory market recovers or more.

<unk>.

As far as the you know products like the L.C. Max and H. 200 that are more segment focus those go to tend to go to a broad base of customers and so we would expect follow ons there as they wrap that particular process flow again, you know that could that could happen in a fairly quickly or.

Little bit later, depending on their their needs I, even potentially before the evaluation close this right.

Okay and final question for me is.

I always had one of the best Implanters for the C. Mafia in sensors and you know you look at the number of cameras per phone and it's a pretty nicely going from you know versus versus historically.

<unk>.

How big tend to see must see would censor business be for you guys as far as a market opportunity or any way you characterize it and I would expect would you expect there to be significant growth this year versus last year in that segment.

So so it's it's a little bit difficult for us to measure the market exactly because some of the implanters that we sell into that market or go into a a general purpose foundry, where they might use it for other other things, but as a whole you're you're absolutely right. They have the the market is growing pretty.

Significantly in plan is a very key enable or for some of the more advanced technologies, whether it's a higher pixel count or you know P.P.V. deep M.I.R. and and Reds and so products like the X.M.X. and the V.X.C.

Enable our customers to do things there and for US there are much higher price systems that a standard high energy tool and so that grows the market in terms of revenue. Additionally.

Units and I think the last thing comment on that is.

Many of these image sensors are sent out a different foundries and so most boundaries want that business and for them to be able to have that business. They really need to put the best implant are in place and so you know the implant or are we might start with an evaluation at at.

At a key boundary or or T.I.D.M., that's doing image sensors and it will quickly roll out like the V. actually did too many of the other foundries so that they're they have that capability.

Okay I I I said it was last question, but I had one more just on the the virus a couple of memory for jobs and you know ground zero of this thing have you been able to units into those factories or could you just talk about what some of we'll just.

Sorry to get tools into those locations if there if they are active at this point.

So at this point, if we can't comment on specific customer you know shipment.

Yeah, we we talk about China, we're not going to talk about specific provinces in China specific customer. So I think we'll just you know keep it.

We left it wouldn't post Kevin and I said that you know we're monitoring it very closely we factored what we know today into you know our T. one guidance and we'll just continue to watch it and take appropriate actions.

Thank you.

Thanks.

[noise]. Thank you and our next question comes from Mark Miller with the Benchmark Company line is now often.

You're getting the 50 per cent memory content in the first quarter, yet 35% for the year I was just wondering in terms of your thinking.

<unk> some mothers have come out and express some caution about data centres by name being sick locally slowing second half a year. This part of your thing team.

In terms of New York your projections from memory this year versus.

Versus 2021.

Well in general.

You know what we've seen from a memory perspective for this year. Mark is you know there's not there's not one gigantic driver. There's you know there's a lot of little things right. There's the windows seven retirement.

The initial.

There's the initial five g. phones, they will start to see more of towards the end of the year Oh. So there's a there's a bunch of smaller things seriously of initial five g. infrastructure, which is driving to memory and so so there's not that one big thing, we expect that to really start to happen in 2021 when.

You know all of those factors are starting to come together and and it will drive the volume of both D. Ram and then so for this year.

<unk>, we see a little bit of a a pick up in this quarter as we said, we're seeing a higher quote activity for DRAM food materialize in the second house, but for right now, we're we're saying at 35% in terms of what we expect to mix to be from memory.

Well, what are you, saying, Oh, you're getting much.

This from the domestic Chinese is that's starting to wrap a meeting see memory has an aggressive wrap this was wondering if you're playing into that opportunity.

It is we have you know we talked about has typically are the majority of our business in China was from some of the global multinationals, but at this point in time, we are seeing a mix with the domestic Chinese customers and we expect that to continue throughout the year.

And finally service service margins were negative it looks like I mean, what what what sort of some added costs for services trying to spiked up this quarter in terms of service cost.

Well, so I.C.S. and I as a whole is very afraid of pets are parts and upgrades and use tools.

And the you must be looking at S.C.C. document that breaks I'll, just a labor peace and that runs very low margins anywhere from negative to single digits, but.

In General are service business. When you look at it already is very healthy and them overall margins are still very creative sort of business.

Thank you.

Thanks.

Thank you as a reminder, ladies and gentlemen to ask a question. Please for a star one.

Our next question comes from Gus Richard with Northland Airlines now.

Yeah, Thanks for taking the questions in congratulations good good quarter.

On the.

Q 14, you give us a split on them it sure how much of that was image sense. It sensors are foundry logic et cetera.

So we don't we don't get down into this specific market segments, but we said 61% of our shipments were mature process technology, 46% of that was what we lead categorized as foundry business and the other 15% was logic.

Okay.

And then in terms of two one just trying to quantify.

The risk going forward do you have a a sense of what you expect your regional mix to be.

[noise]. It at this point you know, we're not going to disclose that I will say you know as as it typically is it's very Asia, okay, but you know it'll be a mix from all the usual suspects in terms of the countries that we ship too.

Got it and then a housekeeping question I didn't catch the booking number in the quarter or what what was that.

Bookings was 77.2 million.

Got it.

Okay. That's it for me thank you <unk>.

<unk>.

Thank you and our next question comes from Quinn, Bolton with need them and company or line is now often.

[noise] hi, guys. Congratulations on the on the nice results. One it's just to ask seems like many of your W. <unk> talked about the sound your logic business and 2020 being front end loaded, but I think those comments really pertain to the advanced foundry logic space given that most of your friends. Your logic is tied to the mature.

Notes, how do you see the profile for staffers his second half in the mature specialty foundry logic segment is it is it flat or is it back cap floated or do you think it. It may also be front half loaded.

It's it's pretty steady it's it's.

Is driven by a very broad base of customers and a a pretty broad mix of of products and do devices from an implant perspective.

The mature markets are actually great because implanters worry more about the individual device. It's run in in these foundries versus just processing wafers and so the bigger the product mix and the broader the customer base the better the implant opportunities in in the mature markets. So so we.

We see it as as good solid business throughout the year and so.

And then once follow up on on some of the [noise] emails that you closed this quarter little closing that in the March quarter, specifically Dragon you know, we've all seen I think the past cycles, one memory turns on it it can turn on in a hurry and I guess my question is the extent that some of that DRAM activity that you.

We're starting to see quotes for if that pulls more into the second half of 2021st can you can you get the dragon system up and produce to meet that accelerated time schedule and if you can meet that time schedule would it have any impact on more trends or do you think you could rent margins on an accelerated <unk> <unk>.

Well, if if that scenario plays out thanks.

Alright, so I'll I'll start with sort of a business side of that and then Kevin can talk about the margins Ah, Yes, we expect to get follow on orders from the <unk>. There were three 8000, we closed all memory <unk> two or high current one was high energy one of those high currents were superior.

Dragging and we fully expect to get additional follow on orders for that in 2020.

Yeah, I think I think from a higher volume point of view.

You know dragging would be more of a 2021.

A lot of the business. We are again this year and a high current will do with the existing hi current tools we have.

But as Mary said, you know is he's $8 plausibly expect to see follow on with the Dragon tools those areas.

The last part of your your question Quinn or do we have the ability to wrap the the product quickly and the answer to that is yes. So so keep in mind that we have a lot of commonality.

Peering platform and the N. station and so forth and so we do have the ability to wrap the product quickly.

But but but it sounds like from marriage comment that that the the Dragon is probably you know even if you see some of these projects start to accelerate that.

Dragging is still probably more of a 2021 volume Ram.

I just want make sure I got the right sort of expectation, Okay, [laughter], and then last week or room.

Sorry go ahead.

I was just going saying and that's that's really in line with how we see the memory market Plano, where you know the the real volume ramp is is 2021 and you know that aligns well with you know Kevin's comments in terms of our you know our our road map up to the 550 model memories required in.

These new products, you know really isn't a good position to get to that 42% to 43% in that model.

[noise] <unk>, great and then just wanting to final question on dragging now that you feel close the first Steve Howe tool can you give us any update on on how you think or what the opportunity to get to please email tools on the advanced logic side for dragging or do you think most of those details for Dragon.

Going forward stay stay on the D. rambert inside.

Well I mean, we continue we've we've talked about this many times we continue to work with they're now for customers really are five who are are working at advanced nodes for for logic. In we're we're working with all of them. So you know at some point, we continue we expect to penetrate a into that into that mark.

Segment, but you know, we're not going to make any specific comments about which products and and let the timing on that is we'll just continue to work at it.

Okay. Thank you.

Thank you thanks <unk>.

This includes the question and answer portion of the call.

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